Phenix Ins. Co v. Clay

• Citation: 101 Ga. 331,28 S.E. 853
• Parties: PHENIX INS. CO. v. CLAY.
• Decision Date: 09 June 1897
• Court: Georgia Supreme Court

28 S.E. 853

101 Ga. 331

PHENIX INS. CO.

v.CLAY.

Supreme Court of Georgia.

June 9, 1897.

Insurance—Property Rented for Illegal Purposes—Liability for Attorney's Fee and Damages.

1. The mere fact that a house is let to and occupied by a lewd person, which, with the knowledge of the owner, is to be used by her for purposes of prostitution, does not of itself avoid a policy of insurance issued thereon in favor ofthe owner. The contract of insurance is not so connected with the contract of rental as to prevent, in case of loss, the maintenance of an action on the policy by the owner.

2. The specific questions made in the record, other than as above ruled, were examined and determined when this case was here upon a former writ of error. Olay v. Insurance Co., 25 S. E. 417, 97 Ga. 44.

3. The questions of law made in this case were of such character as to acquit the defendant of bad faith in refusing to pay the loss within the time limited by law, and, to the extent of the finding of attorney's fees and damages, the verdict is contrary to law; and direction is therefore given that, upon or before the entering of the remittitur, the plaintiff shall write off the items allowed on that account in the finding by the jury, and that the verdict thereupon stand affirmed, the costs accrued since the verdict to be taxed against the defendant in error.

(Syllabus by the Court.)

Error from superior court, Bibb county; W. H. Felton, Jr., Judge.

Action by C. C. Clay against the Phenix Insurance Company. Plaintiff had judgment, and defendant brings error. Affirmed, with direction.

Dessan & Bartlett and Robt. Hodges, for plaintiff in error.

Hardeman, Davis & Turner, for defendant in error.

SIMMONS, C. J. The Phenix Insurance Company issued to Clay a policy of insurance on a house of the latter, which had been by him let to a lewd woman, with knowledge on his part that it was to be used by her for purposes of prostitution. The question to be decided here is as to whether the fact that the house was so rented and used will, in case of loss, defeat Clay's action on the policy. In the absence of any stipulation in the policy under which the immoral use of the house would vacate the contract, the policy would not be vacated unless it be shown that the contract is immoral or illegal, or is against public policy, and not enforceable. It is well settled that contracts will not be avoided by the courts, as against public policy, except "where the case is free from doubt, and where an injury to the public interest clearly appears." Therefore, to defeat the action on the policy it must be shown either that the policy is itself illegal, as promoting or tending to promote the maintenance of a lewd house, or that the contract of insurance, while in itself legal, is so connected with the illegal act or business, or with the contract of rental, that the courts, on grounds of public policy, will not lend their aid in its enforcement. Let us consider these questions in inverse order.

In the case of Armstrong v. Toler, 11 Wheat. 258 (opinion by Marshall, C. J.), the supreme court of the United States held: "Where a contract grows immediately out of, and is connected with, an illegal or immoral act, a court of justice will not lend its aid to enforce it. But if the promise be entirely disconnected with the illegal act, and is founded on a new consideration, it is not affected by the act, although it was

known to the party to whom the promise was made, and although he was the contriver and conductor of the illegal act." The same court, in the case of Insurance Co. v. Polleys, 13 Pet. 157, held: "A contract may be valid, notwithstanding it Is remotely connected with an independent illegal transaction, which, however, it is not designed to aid or promote." The same doctrine was held by this court in the case of Howell v. Fountain, 3 Kelly, 176, where the court commended, and recognized as well founded, the statement that "no action can be maintained upon an illegal or immoral contract, yet where the contract was disconnected with the original unlawful act, and was founded on a new and distinct consideration, an action might be maintained upon it, although it could not be maintained upon a contract directly arising out of the illegal act." So here, if the policy of insurance be shown to grow immediately out of the illegal use of the house, or to be directly connected therewith, the courts will not enforce it. So far as the Insurance is concerned, neither party to the policy was benefited by the illegal use of the insured property. The contract of insurance cannot be said to grow out of or to be connected with the illegal use of the house. To the contrary, the policy was made to insure the owner of the building against accident to which all houses are liable, and this house neither more nor less on account of its use for purposes of prostitution. For the same reasons, the insurance policy...